SHARED OWNERSHIP SOLICITORS NOTTINGHAM

SHARED OWNERSHIP - A GUIDE FOR PURCHASERS

Shared ownership is a scheme which helps people who cannot afford to buy a home of their own outright.

This guide provides information about how the scheme works, who to contact, the legal procedure and stamp duty.

WHAT IS SHARED OWNERSHIP?

Shared ownership is an affordable way to part-buy and part-rent your home.  It is partly financed by a government grant, so cheaper than buying a property outright.  The combined monthly rent and mortgage payments are lower than the monthly cost of a full mortgage.  You can buy as little as 25% or as much as 75% with an option to buy further shares when you can afford to do so. 

Who is eligible?

Eligibility varies depending on any local authority rules, but generally includes first-time buyers, key workers, those living in temporary accommodation and people relocating through work or relationship breakdown.

Who to contact?

You can apply direct to a housing association or contact the local authority who can arrange to put you on a waiting list.  They will assess your eligibility and be able to confirm if you are acceptable.

How does shared ownership work?

A monthly rent is paid to the landlord in respect of the share you have not purchased. For the percentage share you buy, you will normally require a mortgage.  There are only certain lenders that accept shared ownership property.  The housing association can usually put you in contact with a mortgage adviser who is used to dealing with this type of mortgage.

Fees

As with any purchase there are associated fees. These include the following:-

• Legal fees
• Valuation/Survey fee payable to your lender
• Mortgage Arrangement fee depending on your lender
• Stamp duty (if applicable)
• Deposit
• Moving Expenses

Once you have completed your purchase, you will have regular payments as follows:-

• Mortgage
• Rent
• Service charge (if applicable)
• Council Tax
• Utility bills
• Other household bills
• Repairs and maintenance costs if these are not covered by a service charge

Purchasing a larger share

This is known as staircasing and in most schemes, means you can eventually own your home outright.  There is no obligation to purchase a larger share, but the scheme is designed to be flexible should your circumstances change. 

Initially, you contact the housing association who will arrange a valuation and will offer you a price to purchase the extra share.  Any improvements you have made to the property will be disregarded in calculating the price of the further share. Once you have completed the purchase, your rent is reduced accordingly, but your mortgage payments will increase. 

Stamp Duty

At present, if you are a first time buyer, you are likely to be exempt from stamp duty.  However, at some point in the future, this exemption may be withdrawn.  There is also an exemption if you buy a property in a dis-advantaged area.  Other than this, duty is payable either at the outset of the purchase on the whole value of the property, with no further duty payable if you later staircase.  Alternatively, you can opt to pay duty on the share you buy initially and then pay on any later share purchased, with nothing to pay until you own more than 80%. Duty payable will be at future market values, which may of course, increase.  When buying a second hand shared ownership property, duty payable will depend on what the original buyer did at the outset.

What happens when I sell?

You should first contact the housing association as most leases are on the basis of the housing association having first right of refusal and they often have a waiting list of potential buyers. There are strict time limits in the lease and if the housing association have not found you a buyer within this time, you are free to market the property through an estate agent.

Who benefits from any increase in value upon sale?

You will benefit from any increase, depending on the share you own.  For example, if your home has increased by £20,000 and you own a 50% share, you will benefit by £10,000.

Remember, though, that house prices can fall as well as rise.  If this happens, you will have to bear your share of the loss.

Why instruct us?

The legalities of a shared ownership transaction are by no means straightforward.  Coupled with deadlines to meet for exchange of contracts, and busy working schedules, you are best dealing with a specialist solicitor who deals with them regularly.  This is also likely to keep your costs down and so save you money.

Michelle Young is a property lawyer specialising in shared ownership, and is based at our West Bridgford Office. Contact Michelle on 0800 124 4012 or by email.